fp0001584_nq.htm
 
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM N-Q
 
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
 
Investment Company Act file number         811-02363         
 
Cornerstone Total Return Fund, Inc. 
(Exact name of registrant as specified in charter)
 
260 Madison Avenue, 8th Floor                           New York, New York
10016 
                   (Address of principal executive offices)
(Zip code)
 
Frank J. Maresca
 
Ultimus Fund Solutions, LLC    260 Madison Avenue, 8th Floor    New York, NY 10016 
(Name and address of agent for service)
 
Registrant's telephone number, including area code:  (646) 881-4985   
 
Date of fiscal year end:         December 31, 2010      
 
Date of reporting period:        March 31, 2010        
 
Form N-Q is to be used by management investment companies other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to Rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.
 
A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
 
 
 
 
 
Item 1.
Schedule of Investments.
 
CORNERSTONE TOTAL RETURN FUND, INC.
  
SCHEDULE OF INVESTMENTS - MARCH 31, 2010 (UNAUDITED)
  
   
Description
  
No. of Shares
    
Value
  
EQUITY SECURITIES - 99.96%
  
CLOSED-END FUNDS - 9.62%
  
CORE - 4.72%
        
Adams Express Company (The) (a)
     59,400     $ 626,670  
Liberty All-Star Equity Fund
     37,000       175,750  
Royce Micro-Cap Trust, Inc.
     8,200       67,158  
Royce Value Trust, Inc.
     8,000       94,720  
              964,298  
HIGH CURRENT YIELD (LEVERAGED) - 0.13%
          
First Trust Strategic High Income Fund
     8,000       26,160  
                 
OPTION ARBITRAGE/OPTIONS STRATEGIES - 1.47%
          
NFJ Dividend, Interest & Premium Strategy Fund
     19,000       300,580  
                 
REAL ESTATE - 0.45%
          
Cohen & Steers Quality Income Realty Fund, Inc.
     13,000       92,690  
                 
SECTOR EQUITY - 2.53%
          
H&Q Healthcare Investors
     14,400       184,608  
H&Q Life Sciences Investors
     9,000       92,520  
John Hancock Bank and Thrift Opportunity Fund
     14,200       238,702  
              515,830  
U.S. MORTGAGE - 0.32%
          
BlackRock Income Trust, Inc.
     9,896       64,918  
                 
                 
TOTAL CLOSED-END FUNDS
       1,964,476  
                 
CONSUMER DISCRETIONARY - 8.84%
  
Amazon.com, Inc. *
     1,000       135,730  
Bed Bath & Beyond, Inc. *
     2,500       109,400  
Carnival Corporation
     2,500       97,200  
Comcast Corporation - Class A
     2,012       37,866  
Comcast Corporation - Special Class A
     4,250       76,373  
DIRECTV Group, Inc. (The) - Class A *
     4,000       135,240  
Ford Motor Company *
     5,000       62,850  
Gap, Inc. (The)
     2,500       57,775  
Home Depot, Inc. (The)
     5,000       161,750  
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
  
SCHEDULE OF INVESTMENTS - MARCH 31, 2010 (UNAUDITED) (Continued)
  
   
CONSUMER DISCRETIONARY (Continued)
  
Mattel, Inc.
     1,500     $ 34,110  
News Corporation - Class B ^
     2,500       42,525  
NIKE, Inc. - Class B
     2,500       183,750  
Starbucks Corporation
     2,500       60,675  
Target Corporation
     1,500       78,900  
Time Warner Cable, Inc.
     669       35,664  
Time Warner, Inc.
     2,666       83,366  
TJX Companies, Inc. (The)
     2,500       106,300  
Viacom, Inc. - Class B *
     1,000       34,380  
Walt Disney Company (The)
     5,000       174,550  
Yum! Brands, Inc.
     2,500       95,825  
              1,804,229  
CONSUMER STAPLES - 10.40%
  
Altria Group, Inc.
     5,000       102,600  
Coca-Cola Company (The)
     5,000       275,000  
Coca-Cola Enterprises
     2,500       69,150  
Colgate-Palmolive Company
     1,000       85,260  
ConAgra Foods, Inc.
     2,500       62,675  
General Mills, Inc.
     1,500       106,185  
H.J. Heinz Company
     2,700       123,147  
PepsiCo, Inc.
     2,000       132,320  
Philip Morris International, Inc.
     3,500       182,560  
Procter & Gamble Company (The)
     6,472       409,483  
Sara Lee Corporation
     2,500       34,825  
Walgreen Company
     4,100       152,069  
Wal-Mart Stores, Inc.
     7,000       389,200  
              2,124,474  
ENERGY - 10.21%
  
Anadarko Petroleum Corporation
     1,000       72,830  
Chevron Corporation
     3,500       265,405  
Consol Energy, Inc.
     1,500       63,990  
Devon Energy Corporation
     2,500       161,075  
El Paso Corporation
     5,000       54,200  
EOG Resources, Inc.
     1,000       92,940  
Exxon Mobil Corporation
     10,000       669,800  
Halliburton Company
     2,500       75,325  
National Oilwell Varco, Inc.
     1,000       40,580  
Occidental Petroleum Corporation
     4,000       338,160  
Schlumberger Ltd.
     3,000       190,380  
Southwestern Energy Company *
     1,500       61,080  
              2,085,765  
 
See accompanying notes to schedule of investments.
 
 
 
 

CORNERSTONE TOTAL RETURN FUND, INC.
  
SCHEDULE OF INVESTMENTS - MARCH 31, 2010 (UNAUDITED) (Continued)
  
   
FINANCIALS - 13.86%
  
AFLAC, Inc.
     1,500     $ 81,435  
American Express Company
     2,000       82,520  
AON Corporation
     2,500       106,775  
Bank of America Corporation
     10,521       187,800  
Bank of New York Mellon Corporation (The) ^
     2,800       86,464  
BB&T Corporation ^
     2,000       64,780  
Capital One Financial Corporation
     2,500       103,525  
Chubb Corporation (The)
     1,000       51,850  
Citigroup, Inc. *
     24,000       97,200  
Discover Financial Services
     1,000       14,900  
Franklin Resources, Inc.
     1,000       110,900  
Goldman Sachs Group, Inc. (The)
     1,500       255,945  
Hartford Financial Services Group, Inc.
     1,000       28,420  
Hudson City Bancorp, Inc.
     2,500       35,400  
JPMorgan Chase & Company
     12,200       545,950  
MetLife, Inc.
     1,500       65,010  
Morgan Stanley
     2,000       58,580  
PNC Financial Services Group, Inc.
     1,000       59,700  
Prudential Financial, Inc.
     1,500       90,750  
SunTrust Banks, Inc.
     1,500       40,185  
Travelers Companies, Inc. (The)
     3,092       166,782  
U.S. Bancorp ^
     3,500       90,580  
Unum Group
     2,500       61,925  
Wells Fargo & Company
     11,000       342,320  
              2,829,696  
HEALTH CARE - 11.07%
  
Abbott Laboratories
     3,000       158,040  
Amgen, Inc. *
     3,000       179,280  
Baxter International, Inc.
     2,500       145,500  
Bristol-Myers Squibb Company
     4,000       106,800  
Celgene Corporation ^ *
     1,000       61,960  
Cigna Corporation
     3,000       109,740  
Eli Lilly & Company
     2,500       90,550  
Express Scripts, Inc. *
     1,200       122,112  
Gilead Sciences, Inc. *
     2,000       90,960  
Johnson & Johnson
     5,500       358,600  
McKesson Corporation
     2,500       164,300  
Medco Health Solutions, Inc. *
     1,000       64,560  
Medtronic, Inc.
     4,500       202,635  
Merck & Company, Inc.
     2,500       93,375  
Pfizer, Inc.
     14,462       248,023  
 
See accompanying notes to schedule of investments.
 
 
 
 

CORNERSTONE TOTAL RETURN FUND, INC.
  
SCHEDULE OF INVESTMENTS - MARCH 31, 2010 (UNAUDITED) (Continued)
  
   
HEALTH CARE (Continued)
  
WellPoint, Inc. *
     1,000     $ 64,380  
              2,260,815  
INDUSTRIALS - 9.63%
  
3M Company
     1,500       125,355  
Danaher Corporation
     1,000       79,910  
Deere & Company
     1,500       89,190  
Emerson Electric Company
     2,500       125,850  
FedEx Corporation
     1,500       140,100  
General Dynamics Corporation
     1,000       77,200  
General Electric Company
     24,000       436,800  
Illinois Tool Works, Inc.
     3,500       165,760  
Lockheed Martin Corporation
     2,500       208,050  
Precision Castparts Corporation
     1,000       126,710  
Republic Services, Inc.
     1,125       32,648  
Union Pacific Corporation
     2,500       183,250  
United Parcel Service, Inc. - Class B
     1,000       64,410  
United Technologies Corporation
     1,500       110,415  
              1,965,648  
INFORMATION TECHNOLOGY - 17.43%
  
Agilent Technologies, Inc. *
     2,500       85,975  
AOL, Inc. *
     242       6,127  
Apple, Inc. *
     2,000       469,860  
Automatic Data Processing, Inc.
     2,500       111,175  
CA, Inc.
     2,500       58,675  
Cisco Systems, Inc. *
     13,000       338,390  
Corning, Inc.
     3,000       60,630  
eBay, Inc. *
     2,500       67,375  
Google, Inc. - Class A *
     1,000       567,010  
Hewlett-Packard Company
     5,000       265,750  
Intel Corporation
     11,000       244,860  
International Business Machines Corporation
     2,200       282,150  
Intuit, Inc. *
     2,500       85,850  
Micron Technology, Inc. *
     2,000       20,780  
Microsoft Corporation
     14,000       409,780  
Oracle Corporation
     12,600       323,694  
Paychex, Inc.
     2,500       76,750  
Texas Instruments, Inc.
     2,000       48,940  
Western Union Company (The)
     2,000       33,920  
              3,557,691  
MATERIALS - 3.04%
  
Air Products & Chemicals, Inc.
     1,500       110,925  
 
See accompanying notes to schedule of investments.
 
 
 
 

CORNERSTONE TOTAL RETURN FUND, INC.
  
SCHEDULE OF INVESTMENTS - MARCH 31, 2010 (UNAUDITED) (Continued)
  
   
MATERIALS (Continued)
  
E.I. Du Pont de Nemours & Company
     4,800     $ 178,752  
Freeport-McMoRan Copper & Gold, Inc.
     2,500       208,850  
Monsanto Company
     1,000       71,420  
Newmont Mining Corporation
     1,000       50,930  
              620,877  
REAL ESTATE INVESTMENT TRUST - 0.01%
  
Simon Property Group, Inc.
     16       1,342  
                 
TELECOMMUNICATION SERVICES - 2.67%
  
AT&T, Inc.
     11,089       286,540  
Qwest Communications International, Inc.
     5,000       26,100  
Verizon Communications, Inc.
     7,500       232,650  
              545,290  
UTILITIES - 3.18%
  
AES Corporation (The) *
     3,000       33,000  
Consolidated Edison, Inc.
     1,000       44,540  
Dominion Resources, Inc.
     2,000       82,220  
Duke Energy Corporation
     6,600       107,712  
Exelon Corporation
     2,500       109,525  
NiSource, Inc.
     2,500       39,500  
Southern Company (The)
     3,500       116,060  
Xcel Energy, Inc.
     5,500       116,600  
              649,157  
                 
TOTAL EQUITY SECURITIES (cost - $20,032,438)
       20,409,460  
                 
                 
SHORT-TERM INVESTMENTS - 2.04%
                
MONEY MARKET FUND - 0.32%
                
JPMorgan U.S. Government Money Market Fund
     65,237       65,237  
                 
   
Principal
Amount (000's)
          
REPURCHASE AGREEMENT - 1.72%
                
J.P. Morgan Securities, Inc. †
                
(Agreement dated 3/31/2010 to be repurchased at $352,200, 0.12%, 4/1/2010, collateralized by 364,489 in United States Treasury Notes)
   $ 352       352,200  
                 
TOTAL SHORT-TERM INVESTMENTS (cost - $417,437)
       417,437  
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
  
SCHEDULE OF INVESTMENTS - MARCH 31, 2010 (UNAUDITED) (Continued)
  
   
TOTAL INVESTMENTS - 102.00% (cost - $20,449,875)
   $ 20,826,897  
         
LIABILITIES IN EXCESS OF OTHER ASSETS - (2.00)%
     (407,957 )
         
NET ASSETS - 100.00%
   $ 20,418,940  
 
(a) Affiliated investment.  The Fund holds 3.07% (based on net assets) of Adams Express Company.  A director of the Fund also serves as a director to such company.  There were no purchase or sales of this security during the three months ended March 31, 2010. The Fund earned $2,970 in income during the three months ended March 31, 2010.  
* Non-income producing security. 
^ Security or a portion thereof is out on loan.
 † Represents investment purchased with collateral received for securities on loan.
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
NOTES TO SCHEDULES OF INVESTMENTS
March 31, 2010 (UNAUDITED)
 
Federal Income Tax Cost: At March 31, 2010 the identified cost for federal income tax purposes, as well as the gross unrealized appreciation from investments for those securities having an excess of value over cost, gross unrealized depreciation from investments for those securities having an excess of cost over value and the net unrealized appreciation from investments were $20,449,875, $2,259,915, $(1,882,893) and $377,022 respectively.
 
As required by the Fair Value Measurement and Disclosures Topic of the FASB Accounting Standards Codification, the Fund has performed an analysis of all assets and liabilities measured at fair value to determine the significance and character of all inputs to their fair value determination.
 
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into the following three broad categories.
 
 
·
Level 1 – quoted unadjusted prices for identical instruments in active markets to which the Fund has access at the date of measurement.
 
 
·
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.
 
 
·
Level 3 – model derived valuations in which one or more significant inputs or significant value drivers are unobservable.  Unobservable inputs are those inputs that reflect the Fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.

The following is a summary of the inputs used as of March 31, 2010 in valuing the Fund’s investments carried at value:
 
Valuation Inputs
  
INVESTMENTS IN SECURITIES
    
OTHER FINANCIAL INSTRUMENTS*
  
             
Level 1 - Quoted Prices
   $ 20,409,460     $ -  
Level 2 - Other Significant Observable Inputs
     417,437       -  
Level 3 – Significant Unobservable Inputs
     -       -  
Total
   $ 20,826,897     $ -  
* Other financial instruments include futures, forwards and swap contracts.
 
During the period the Fund did not have any significant transfers in and out of Level 1 or Level 2.
 
The Fund did not have any assets or liabilities that were measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at March 31, 2010.
 
New Accounting Pronouncement: In January 2010, the FASB Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2010-06 “Improving Disclosures about Fair Value Measurements”. ASU 2010-06 amends FASB Accounting Standards Codification Topic, Fair Value Measurements and Disclosures, to require additional disclosures regarding fair value measure­ments. Certain disclosures required by ASU No. 2010-06 are effective for interim and annual reporting periods beginning after December 15, 2009 and have been reflected herein while other required disclosures are effective for fiscal years beginning after December 15, 2010,  and for interim periods within those fiscal years. Management is currently evaluating the impact ASU No. 2010-06 will have on its financial statement disclosures.
 
 
 
 
 
The Fund is exposed to financial market risks, including the valuations of its investment portfolio.  For the pe riod ended March 31, 2010, the Fund did not engage in derivative instruments and other hedging activities.
 
Securities valuation policies and other investment related disclosures are herby incorporated by reference to the Fund’s annual report previously filed with the Securities and Exchange Commission on the Form N-CSR on March 5, 2010 with a file number 811-02363.
 
Other information regarding the Fund is available in the Fund’s most recent annual report filed with the Securities and Exchange Commission on the Form N-CSR on March 5, 2010, file number 811-02363.  This information is also available to registered shareholders by calling (800) 937-5449.  For general inquiries, please call (513) 326-3597.  This information is also available on the website of the Securities and Exchange Commission – http://www.sec.gov.
 
 
 
 
 
Item 2.
Controls and Procedures.
 
(a)  Based on their evaluation of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) as of a date within 90 days of the filing date of this report, the registrant’s principal executive officer and principal financial officer have concluded that such disclosure controls and procedures are reasonably designed and are operating effectively to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this report is being prepared, and that such information is recorded, processed, summarized, and reported on a timely basis.
 
(b)  There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
 
Item 3.
Exhibits.
 
File as exhibits as part of this Form a separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)):  Attached hereto
 
 
 
 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
(Registrant)   Cornerstone Total Return Fund, Inc.            
 
By (Signature and Title)*
/s/ Ralph W. Bradshaw
  
 
Ralph W. Bradshaw, President and Chairman
  
 
(Principal Executive Officer)
  
     
Date
May 24, 2010
    

 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
By (Signature and Title)*
/s/ Ralph W. Bradshaw
  
 
Ralph W. Bradshaw, President and Chairman
  
 
(Principal Executive Officer)
  
     
Date
May 24, 2010
    

 
By (Signature and Title)*
/s/ Frank J. Maresca
  
 
Frank J. Maresca, Treasurer (Principal Financial Officer)
  
Date
May 24, 2010
    
 
* Print the name and title of each signing officer under his or her signature.